Main Street businesses — especially music clubs, gyms, restaurants, bars and others that were forced to close by the coronavirus pandemic — are trying to figure out how, or if, they can dig out of debt.
Nearly 73,000 businesses have closed permanently since the pandemic took hold, according to an analysis by Yelp. And the fate of many that remain open increasingly hinges on their ability to renegotiate their leases.
“For 10 weeks, our revenue went to zero and stayed at zero,” said Rhonda Stark, the owner of three Orangetheory Fitness gyms in Ohio that were shut down from mid-March until late May. Ms. Stark’s collective rent bill, her largest fixed expense, tops $32,000 a month. She hasn’t paid it in full since March. Ms. Stark’s gyms have reopened at a reduced capacity, cutting her sales by about 30 percent. To stay open, she needs to strike new deals with her landlords.
Retail rent collections plunged in April to just 54 percent of the total owed, according to Datex Property Solutions, a software company that tracks data on thousands of its clients’ retail properties nationwide. By August, collections had rebounded to nearly 80 percent, but some tenants, like movie theaters, clothing retailers, hair salons and gyms, were much further behind.
“When tenants can’t pay the rent, it imperils landlords’ ability to pay their own overhead and their loans, and the whole thing cascades,” Mark Sigal, chief executive of Datex, said.
For both sides, it’s a complicated dance. Property owners have their own expenses to pay, including taxes, insurance, mortgage or debt payments, and maintenance bills. Buildings owned by real estate investment trusts or Wall Street bondholders have complex management structures and governing covenants that can limit the property manager’s ability to make a deal.